The primary goal of an auditor's job in an audit engagement is to achieve reasonable assurance that the financial statements as a whole are free of material misstatement so that the auditor can make an opinion on the financial statements and reflect accordingly in the auditor's report. The auditor must develop and implement audit processes to acquire sufficient relevant audit evidence to be able to draw reasonable inferences on which to base the auditor's opinion, which is a high but not absolute level of certainty.
Audit evidence — Information used by the auditor to
reach the conclusions that constitute the basis of the auditor's opinion.
Information from the accounting records that underpin the financial statements,
as well as information gathered from other sources, are included in audit evidence.
The
relevance and reliability of the information on which all audit evidence is
based have an impact on its quality. The logical link with, or impact on, the
goal of the audit method and, where appropriate, the assertion under
consideration is referred to as relevance. The source and nature of the information
to be used as audit evidence, as well as the conditions under which it is
received, including the controls over its production and maintenance if
applicable, all influence the audit evidence's reliability.
Obtaining
and assessing audit evidence, which is generally produced from audit processes
carried out during the engagement but can also be obtained from other sources,
is a substantial component of the effort involved in performing an audit. For
example, past audits; provided that any modifications that have occurred in the
meantime have been properly considered; or the firm's quality control methods,
particularly those relating to customer acceptance and continuation.
The auditor obtains audit evidence by performing:
(a) risk assessment procedures; and
(b) additional audit procedures, which include:
(i) controls
tests, when required by the ISAs (UK) or when the auditor chooses to do so; and
(ii) substantive
procedures, including tests of details and substantive analytical procedures.
The
auditor must decide how to pick things for testing that are successful in
satisfying the purpose of the audit method while creating controls and detail
tests. If: (a) audit evidence obtained from one source differs from that
obtained from another, or (b) the auditor has doubts about the reliability of
information to be used as audit evidence, the auditor must determine what
changes or additions to audit procedures are required to resolve the issue, as
well as the impact of the issue, if any, on other aspects of the audit.
Practice:
The
auditor may use inspection, observation, external confirmation, recalculation, reperformance,
analytical procedures, inquiry, etc. as risk assessment procedures, tests of
controls, or substantive procedures, depending on the context in which they are
applied by the auditor.
Reference:
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